The Cosmos Hub is gearing up to start deploying Venture Funding via the ATOM Accelerator DAO (AADAO). Emulating the model of venture capital investments, this is the first time the Cosmos Hub will monetize the exponential growth of the interchain — the ecosystem it gave birth to.
Venture investments are recognized as potent value drivers because they target early-stage projects with high growth potential. Through the AADAO Venture Funding Program, the Cosmos Hub will acquire a stake in and benefit directly from the launch of projects building on the interchain.
Approved by Cosmos Hub governance, AADAO will grow and diversify the tokens in the ATOM Community Pool by making venture funding on behalf of the Cosmos Hub.
In addition to looking at the potential gains to the Community Pool, we will primarily deploy Venture Funding to mission-aligned projects — projects that are aligned with the Cosmos Hub’s spirit, culture and purpose. These may include high-quality chains looking to use Interchain Security, projects that will use ATOM as gas, dApps that have the potential to bolster onchain user activity, etc.
While every Venture Grant will be different, typical deal structures may include:
- Revenue Sharing: The Hub Community Pool receives a share of the grantee’s revenues for a specified time period.
- Equity/Token Allocation: A grantee provides a portion of its equity or token distribution to the Cosmos Hub Community Pool, allowing the Hub community to directly benefit from the project’s growth. In such a scenario, the Hub would get 2 different airdrops: one targeting the ATOM stakers (community airdrop) and the other directed at the ATOM Community Pool, corresponding to AADAO Venture Grant token allocation.
- Other Preferential Terms:
- Airdrops: The Cosmos Hub is undeniably a magnet for airdrops from new projects launching in the ecosystem, in a bid to bootstrap a user base from the interchain’s largest and most active community. But with recent airdrops additionally focusing on other chains (Celestia, Dymension, etc.), our deals could be structured to include preferential terms for our beneficial owners — ATOM stakers.
- Unclaimed tokens: Examples like Neutron’s airdrop show that a substantial amount of tokens are left unclaimed. AADAO will negotiate the best terms for clawing back these unclaimed tokens to the Cosmos Hub.
- ATOM as default gas token: To ensure close alignment with ATOM, the project could set ATOM as the default option for paying network fees.
As representatives of the Cosmos Hub, AADAO seeks to drive tangible and measurable value for the Hub through these venture funding. It is also worth noting that, for the first time, these potential partner projects will have a counterparty to negotiate with, thereby ensuring that the Hub receives the best possible terms from the best possible projects.
Learn more about our Venture Funding Program.
Growing the AEZ
The new tokens from Venture Funding that will accrue in the Hub’s Community Pool can then be reinvested in the growth of the AEZ — from funding new projects, unlocking cross-chain governance, or using the tokens to create value alignment. An example of this is Neutron, which recently requested 1.8 M NTRN to be reinvested to align Neutron’s validators (of the 42M NTRN AADAO secured for the Community Pool).
Using technologies like Interchain Accounts, these tokens could also unlock cross-chain governance, for example, allowing the Cosmos Hub to potentially vote on governance on other chains — further validating the Hub’s position as a political center of the interchain.
Funding the Cosmos Hub itself
This larger Community Pool can also allow for more sustainable development of the Cosmos Hub (the Hub recently funded its own development for the first time) and will shore up the Community Pool for the Protocol-owned Liquidity (PoL) and other deals proposed as part of initiatives like Atom Wars — all of which, in turn, generate more value for the Community Pool.
While the majority of this generated value will flow directly to the Community Pool, as discussed during our governance proposal, 20% of the value derived from these venture fundingwill be retained by AADAO — to deploy into other grants or Venture Funding, or to stake in order to generate more revenue for our grants programs. This is a critical component of the DAO’s strategy for achieving financial self-sustainability while remaining fully owned by the Hub — an approach designed to reduce AADAO’s dependency on the Community Pool for funding.
It’s important to highlight that AADAO is fully owned by Cosmos Hub governance, meaning that even this 20% retained value is ultimately held for and utilized entirely, for the benefit of the Cosmos Hub via grants, venture funding or quadratic funding. This setup ensures that all generated assets and the accrued benefits remain under the ownership of the Cosmos Hub — which can be transferred to the Community Pool should governance wish to liquidate the AADAO.
For context, in 2023, AADAO successfully negotiated for 42M NTRN of the unclaimed Neutron token airdrop to flow back to the Hub Community Pool (now worth approx. $26.8M, or about 4+ years of the Hub’s 2024 core development cost).
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About the Atom Accelerator DAO
AADAO is a governance-mandated DAO of the Cosmos Hub. We have been formed and mandated to drive value for the Cosmos Hub, supporting initiatives that either directly create economic impact or produce value that can drive its growth.
In 2023, we deployed $3.8 million in grants to 39 recipients — resulting in, among other things — a $22m USD airdrop to the Community Pool, an AEZ Accelerator program to expand the AEZ, a successful hackathon with 42 project submissions bringing innovations to the AEZ — and many other key initiatives. Read about them in our 2023 Impact Report.
Note: “Cosmos Hub Venture Funding”, deployed via the Atom Accelerator DAO, was previously called “Venture Grants”
